Girija Devi Kommareddy, Visakhapatnam V. The Assistant Commissioner of Income Tax, Circle-3(1). , Visakhapatnam

ITA 188/VIZ/2020

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 0232 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 1 year(s) 10 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-07-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: DB
• Assessment Year: 2014-2015
• Appeal Filed On: 21-09-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Gift; Opportunity of being heard; Peak credit; Cost of acquisition; Set aside; Capital Gains
• Section: 68; 54F; 142(1); 143(2)

Judgement Text

आयकरअपीलीयअधिकरण, धिशाखापटणम पीठ, धिशाखापटणम IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM श्री द ु व्वूरु आर एल रेड्डी, न्याधयक सदस्य एिं श्री एस बालाकृ ष्णन, लेखा सदस्य के समक्ष BEFORE SHRI DUVVURU RL REDDY, HON’BLE JUDICIAL MEMBER & SHRI S BALAKRISHNAN, HON’BLE ACCOUNTANT MEMBER आयकर अपील सं./I.T.A.No.188/Viz/2020 (ननधधारण वर्ा / Assessment Year : 2014-15) Girija Devi Kommareddy D.No.9-29-24/B, CBM Compound Balaji Nagar, Siripuram Visakhapatnam [PAN : ADFPK3441H] Vs. Asst.Commissioner of Income Tax Circle-3(1) Visakhapatnam (अपीलार्थी/ Appellant) (प्रत्यर्थी/ Respondent) अपीलधथी की ओर से/ Appellant by : Shri G.V.N.Hari, AR प्रत्यधथी की ओर से / Respondent by : Shri S.P.G.Mudaliar, DR सुनवधई की तधरीख / Date of Hearing : 09.05.2022 घोर्णध की तधरीख/Date of Pronouncement : 22 .07.2022 O R D E R Per Shri Duvvuru RL Reddy, Judicial Member : This appeal is filed by assessee against the order of the Commissioner of Income Tax (Appeals) [in short, “CIT(A)”]-1, Visakhapatnam in ITA No.10507/2016-17/CIT(A)-1/VSP/2020-21 dated 17.08.2020 for the Assessment Year (A.Y.) 2014-15. 2 ITA No.188/Viz/2020, A.Y.2014-15 Girija Devi Kommareddy, Visakhapatnam 2. The assessee has raised the following grounds of appeal : 1. The order of the Commissioner of Income Tax (Appeals)-1 is contrary to the law and facts of the case. 2. The Commissioner of Income Tax(Appeals)-1 is not justified in disposing the appeal without giving proper notice and also without hearing the authorised representative. Even though it was mentioned that the Authorised Representative of the appellant appeared and the case was discussed with him is not a fact. Hence, the appeal thus disposed of may kindly be cancelled. 3. Without prejudice to the above, it is further contended that the Commissioner of Income Tax (Appeals)-1 is not justified in confirming the addition made by the assessing officer under the head Long Term Capital Gain to the tune of Rs.12,46,018/- without appreciating the facts of the case. And also without giving a proper notice in this regard the Appellate Authority accepted the order of the Assessing Officer on this issue. Hence, the appellant prays for relief. 4. The Commissioner of Income Tax (Appeals)-1 is not justified in confirming the addition of Rs.70,50,278/- regarding the unexplained cash credits u/s 68. As the appellant had given proper clarification and explained and submitted proper details to the Assessing Officer, the learned Commissioner of Income Tax (Appeals) is not justified to confirm the addition of Rs.70,50,278/- u/s 68 r.w.s. 158BBE of the Income Tax Act and hence the appellant prays relief. 3. Ground No.1 is general in nature which does not require specific adjudication. 4. Ground No.3 is related to long term capital gains. Brief facts of the case are that the assessee is an individual, filed her return of income for the A.Y.2014-15, admitting total income of Rs.24,81,960/- and agricultural income of Rs.85,000/-. Subsequently, the case was selected for scrutiny 3 ITA No.188/Viz/2020, A.Y.2014-15 Girija Devi Kommareddy, Visakhapatnam under CASS and accordingly, notices u/s 143(2) and 142(1) of the Income Tax Act, 1961 (in short ‘Act’) were issued calling for information / details. On perusal of the return of income along with its enclosures, the Assessing Officer (AO) observed that the assessee came into possession of a landed property located at Door No.9-29-24B, Balaji Nagar, Visakhapatnam measuring 463 sq.yds along with a building measuring 2711 sq.ft through a gift received from her son Shri Kommareddy Sadasiva Rao vide gift deed dated 12.10.2011. The assessee spent an amount of Rs.2,05,63,106/- towards cost of construction of total area of 15000 sft. However, out of 15000 sft so constructed , the assessee sold 6000 sft area along with 200 sq.yds of undivided and unspecified share of land to two different persons and arrived at long term capital gains of Rs.40,26,965/- on the sale transaction. The assessee had claimed exemption u/s 54F of the Act by showing an investment in a residential property measuring 3000 sft. worth Rs.41,10,000/- and offered to tax nil long term capital gains. The AO verified the claim with relevant documents produced by the assessee and arrived at long term capital gain of Rs.12,46,018/-. 4. Aggrieved by the order of the AO, the assessee preferred an appeal before the CIT(A) and the Ld.CIT(A), after careful examination of the case of the assessee held that there is no dispute regarding consideration or cost of 4 ITA No.188/Viz/2020, A.Y.2014-15 Girija Devi Kommareddy, Visakhapatnam construction. The only dispute is indexed cost of acquisition. The assessee is the third donee of the same property. The property was originally purchased on 21.12.1974 and thereafter it was first gifted to Sravani on 19.02.1987 and thereafter to Kommareddy Sadasiva Rao, son of the assessee on 28.05.2005 and lastly to the assessee on 12.10.2011. The Ld.CIT(A) opined that in these circumstances, it is necessary to decide the cost of the previous owner u/s 49(1). The assessee took the cost as on 12.10.2011 being the date of acceptance of gift. On the other hand, the AO adopted the SRO date as on 15.08.1982 as the SRO was unable to give the rate as on 01.04.1981. The assessee was also not able to furnish the rate as on the date of purchase i.e. 21.12.1974. As per section 49(1)(ii) the cost of property under a gift or will shall be deemed to be the cost for which the “previous owner” of the property acquired it. The Ld.CIT(A), on perusal of the Explanation to section 49(1)(ii) held that from the provisions it is clear that the previous owners means the last owner of the capital asset who acquired the asset by a mode other than distribution, gift or will, succession, inheritance, devolution etc. , therefore, held the assessee cannot take the cost from the date of any gift but purchase. Thus the cost to the original purchaser as on 21.12.1974 is the deemed cost to the assessee. Since the assessee was unable to provide the cost as on that date, the AO 5 ITA No.188/Viz/2020, A.Y.2014-15 Girija Devi Kommareddy, Visakhapatnam adopted the possible rate as per the records of SRO as on 15.08.1982., which is valid in law and needs no interference. Accordingly, the Ld.CIT(A) dismissed the ground. 5. Aggrieved by the order of the Ld.CIT(A) the assessee preferred an appeal before the Tribunal and argued that the Ld.CIT(A) is not justified in confirming the addition made by the AO under the head ‘long term capital gains’ as the AO applied the cost of acquisition as on 15.08.1982 which is to be considered in the mode of acquisition by way of purchase etc. But in the case of the gift, the year of acceptance of the gift by the previous owner of the property, Sri Sadasiva Rao has to be considered as per section 49(1) explanation of the Act. Hence requested that the Long Term Capital Gains with reference to the land as was computed by the assessee at Rs.44,46,965/- may be considered. 6. On the other hand, the Ld.DR argued that the Ld.CIT(A) has rightly upheld the order of the AO taking into consideration the correct date of cost of acquisition of the previous owner as per Explanation to section 49(1)(ii) of the Act. Hence, requested to confirm the order of the Ld.CIT(A) and dismiss the ground raised by the assessee. 6 ITA No.188/Viz/2020, A.Y.2014-15 Girija Devi Kommareddy, Visakhapatnam 7. Ground No.4 is related to confirming the addition of Rs.70,50,278/- in respect of unexplained cash credits u/s 68. The Ld.AR submitted that the assessee was holding bank accounts in various banks and upon perusing the bank statements, the AO observed that there were several tranches of big amounts of cash deposits in the accounts throughout the year. The AR of the assessee was asked to explain the sources for these deposits and produce the cash flow statement of the assessee. The assessee submitted a cash flow statement and explained that the assessee had sold 2 flats during the assessment year under consideration after redevelopment of the gifted property and the cash deposits were the advances received from various parties against sale of flats. The Ld.AR has also submitted copies of sale deeds in support of her claim. On perusal of the sale deeds it is observed that the assessee had sold 2 flats (3000 sft each) for a consideration of Rs.1,38,00,000/- and the entire sale consideration was received by way of account payee cheques and there was no component of any cash advances received by the assessee during the year and no written submissions were submitted by the buyers in support of claim of cash advances. The AO observed that though the flats were sold for an average rate of Rs.2,300/- per sq.ft., market enquiries have revealed that the prevailing rates during the A.Y. under consideration was between 7 ITA No.188/Viz/2020, A.Y.2014-15 Girija Devi Kommareddy, Visakhapatnam Rs.5,000/- and Rs.5,500/-. The AO held that it is a common practice in the real estate sector, the difference between the registered cost and market cost of the property is paid in cash and is kept outside the books. Therefore, in the instant case also, the difference between the registered cost and the market value might have been paid to the assessee by various parties in cash which is reflecting as cash deposits in her bank accounts. In order to ascertain the amount of unexplained cash credits and also to accord the assessee the benefit of peak credit, as some of the deposits may have originated from previous cash withdrawals, the total amount of unexplained credits was calculated considering the deposits in all the bank accounts and worked out the peak credit to Rs.70,50,278/- on a combined balances of all the bank deposits and withdrawals. Accordingly, the said amount of Rs.70,50,278/- was brought to tax u/s 68 r.w.s.115BBE of the Act treating the same as unexplained cash credits. 8. Aggrieved by the order of the AO, the assessee preferred an appeal before the CIT(A) and the Ld.CIT(A) after careful consideration of the submissions made by the Ld.AR held that the AO considered all the bank accounts and withdrawals from accounts as well as deposits in order to work out peak credit. The assessee’s claim, that the source of deposits was the advances received from buyers of flat was disproved by the AO after 8 ITA No.188/Viz/2020, A.Y.2014-15 Girija Devi Kommareddy, Visakhapatnam verification with the buyer as the payments were in cheque. The Ld.CIT(A) observed that the assessee during the appellate proceedings had not proved why the AO was wrong in arriving peak credit at Rs.70,50,278/- except merely stating that the AO is wrong and the addition is made on surmise or conjecture and not even provided any material to disprove the contention of the AO. Thus, confirmed the addition made by the AO and dismissed the ground raised by the assessee. 9. Aggrieved by the order of the Ld.CIT(A), the assessee preferred an appeal before the Tribunal and the Ld.AR argued that the assessee had given proper explanation and submitted proper details to the AO and the Ld.CIT(A) is not justified in confirming the addition of Rs.70,50,278/- u/s 68 r.w.s. 158BBE of the Act and therefore, requested to set aside the order passed by the Ld.CIT(A) and allow the ground raised by the assessee. 10. On the other hand, the Ld.DR argued that the Ld.CIT(A) has correctly confirmed the addition made by the AO in the absence of valid material and the assessee also failed to prove that the credits in the bank accounts was nothing but the cash received as advance for purchase of flats from the buyers. Therefore, requested to confirm the addition made by the Ld.CIT(A) and dismiss the ground raised by the assessee. 9 ITA No.188/Viz/2020, A.Y.2014-15 Girija Devi Kommareddy, Visakhapatnam 11. At the outset, the Ld.Counsel for the assessee in Ground No.2 contended that the assessee filed written submissions before the Ld.CIT(A), but the Ld.CIT(A) without considering the written submissions erroneously dismissed the assessee’s appeal. Therefore, he pleaded for one more opportunity of being heard before the Ld.CIT(A). Considering the facts and circumstances of the case and in order to meet the principles of natural justice, we remit the matter back to the file of the Ld.CIT(A) for fresh adjudication after giving opportunity of being heard to the assessee. The assessee is also directed to comply with the notices and directions of the revenue authorities. 12. In the result, appeal of the assessee is allowed for statistical purpose. Order Pronounced in open Court on 22 nd July, 2022. Sd/- Sd/- (एस बालाकृ ष्णन) (द ु व्वूरु आर.एल रेड्डी) (S.BALAKRISHNAN) (DUVVURU RL REDDY) लेखा सदस्य/ACCOUNTANT MEMBER न्याधयकसदस्य/JUDICIAL MEMBER Dated : 22.07.2022 L.Rama, SPS 10 ITA No.188/Viz/2020, A.Y.2014-15 Girija Devi Kommareddy, Visakhapatnam आदेश की प्रतितिति अग्रेतिि/Copy of the order forwarded to:- 1. ननधधाऩरती/ The Assessee– Girija Devi Kommareddy, D.No.9-29-24/B, CBM Compound, Balaji Nagar, Siripuram, Visakhapatnam 2. रधजस्व/The Revenue – Asst.Commissioner of Income Tax, Circle-3(1), Infinity Towers, Shankaramatham Road, Visakhapatnam 3. प्रधान आयकर आयुक्त / The Pr.Commissioner of Income Tax-1, Visakhapatnam 4. आयकर आयुक्त (अपील) / Commissioner of Income Tax (Appeals)-1, Visakhapatnam 5. नवभधगीय प्रनतनननध, आयकर अपीलीय अनधकरण, नवशधखधपटणम/ DR,ITAT, Visakhapatnam 6.गधर्ा फ़धईल / Guard file आदेशधनुसधर / BY ORDER Sr. Private Secretary ITAT, Visakhapatnam